Manufacture test and limitation: assembling duty-paid components into a kit was not manufacture, and extended limitation could not be invoked.

Packing duty-paid components into a cable jointing kit did not amount to manufacture because the components retained their identity and were not transformed into a new commercially distinct product with a different name, character and use; the kit was therefore not dutiable on that basis. The extended period of limitation was also unavailable because the demand rested on a departmental circular issued amid acknowledged doubt on excisability and the assessee acted under a bona fide belief that the process was not manufacture, so suppression with intent to evade duty was not established. The duty demand and penalty were consequently unsustainable.

---

---

Issues: (i) Whether packing duty-paid components into a cable jointing kit amounts to manufacture and attracts classification under sub-heading 8547.00; (ii) Whether the demand for the past period was sustainable by invoking the extended period of limitation.

Issue (i): Whether packing duty-paid components into a cable jointing kit amounts to manufacture and attracts classification under sub-heading 8547.00.

Analysis: The decision turned on the settled test that manufacture requires emergence of a new commercially distinct product having a different name, character and use, along with marketability. The components placed in the kit retained their identity, were merely put together in a box, and did not undergo transformation into a new article. The mere fact that the assembled package was called a cable jointing kit was insufficient to establish manufacture.

Conclusion: The activity did not amount to manufacture, and the goods were not dutiable as cable jointing kits on that basis.

Issue (ii): Whether the demand for the past period was sustainable by invoking the extended period of limitation.

Analysis: The demand was founded on a departmental circular issued when there was acknowledged doubt about excisability, and the assessee consistently proceeded on a bona fide belief that the process was not manufacture. In these circumstances, suppression with intent to evade duty was not made out, and the larger period could not be applied.

Conclusion: The demand for the extended period was barred by limitation.

Final Conclusion: The impugned duty demand and penalty were unsustainable, and the appeal was allowed by setting aside the order under challenge.

Ratio Decidendi: Putting together duty-paid components into a kit without transformation into a new commercially distinct article having a different name, character and use does not constitute manufacture; consequently, in the absence of suppression or intent to evade, the extended period of limitation cannot be invoked.

---